Mercantile Ports & Logistics Regulatory News (MPL)

24 April 2018

Mercantile Ports & Logistics Limited

("MPL" or the "Company")

Progress Update

In its update in February, the Company stated that final customs' approval was expected to be received shortly. Whilst progress has been made in this regard and the Board considers receipt of customs' clearance to be a formality, the Company updates shareholders that this particular milestone has yet to be achieved. The Company remains engaged with the relevant authorities and, following the most recent contact, it has received guidance that this matter is expected to be resolved in the coming weeks. A further update will be provided on or before the Company's annual results, expected to be released in mid-May 2018. 

This delay has been frustrating but the Company can report that significant progress has been made in other areas. In particular, 300 meters of jetty length has been completed in full and is ready for use. In addition, civil construction works have been completed on the dedicated 200 meter break bulk berth. The Directors are confident that the break bulk berth will be ready to be used in conjunction with the receipt of customs' approval. Work has also continued on other infrastructure areas such as fencing, the weigh bridge and office buildings. 

On the commercial side, the Company is pleased to announce that it has entered into an MOU with a US based, engineering logistics company, which is bidding to decommission well head platforms in India. The MOU is for this customer to use 100 meters of the jetty (200 meters of quay length) and 15 acres of backup area, with this land being dedicated to them for engineering purposes. 

As at the 31st March, the Company had cash and undrawn banking facilities of £22.4 million. The Company continues to manage its resources in line with the timetable to operation. As a result of the date of revenue receipts being later than anticipated, the Company has, pending receipt of customs' clearance, reduced the level of expansion activity on site, particularly in the expensive workstream of land reclamation. That said, an additional 10 acres of reclamation material is on site and being used for surcharging, meaning that some 20 acres of reclamation material is on site, with 95 acres reclaimed. This is significantly more land than the circa 50 acres required to commence operations and generate revenue. Reclamation work will, however, accelerate once again upon revenue generation being achieved and this phasing does not impact upon the Company's ability to commence operations at the Facility or on its final configuration as a 200 acre, all weather, port and logistics facility. 

 Much has been written about the growth in the Indian economy and the directors believe that the prospects for the Facility have continued to strengthen. In addition to the general economic climate, there are specific initiatives that are expected to have a beneficial impact on the Company. In particular, the pipeline that runs across the mouth of Karanja creek and which currently limits the draft capacity of vessels using the port, is proposed to be moved by the Government. The Inland Waterway Authority has adopted the Dharamtar and Karanja Creeks for development as part of the Government of India's Sagarmala project to, amongst other things, boost the use of coastal shipping in the country. Once the pipeline has been re-routed, which the Company would hope would be within the next three to four years, the Company's facility will, after additional dredging, be capable of receiving vessels with a draft of up to 11 meters. The infrastructure at the Facility, including the strength of the jetty, has been designed with this possibility in mind. However, the directors are delighted that this initiative has commenced much sooner than they had anticipated.

Nikhil Gandhi said "We are now very close to receiving our first paying vessel. We are proud to be associated with the Sagarmala vision of the Government of India and look forward to both supporting it as well as capitalising on the immense opportunities it presents. I would like to thank the Maharashtra Maritme Board for their continued support."